The 0.25% increase – described as a “bitter blow” for London homeowners – was the fourth unprecedented increase in history from the Monetary Policy Committee (MPC) setting the rate. Bank price.

The committee voted with a majority of 6 votes to 3 to increase the rate by 0.25%. The three dissenting MPC members want a larger 0.50% increase.

Bank interest rates are now at their highest level since March 2009 when the recession that triggered the global financial crisis sent borrowing costs down to emergency lows to keep the global economy moving. continue to develop.

The move comes after the US Federal Reserve raised its key interest rate to 0.5% on Wednesday, in its biggest increase in 22 years.

The bank said Thursday’s increase was needed to tackle rampant inflation, which hit 7% in March and is now expected to hit 9% in April as the limit on energy bills rises 54% and peaks at 10% in the fall.

But it will mean an extra burden for homeowners and businesses at a time when they are already grappling with soaring energy, fuel and food prices.

The bank also sharply downgraded its economic growth forecast with a 0.25% decline now expected in 2023 due to disruptions caused by the Ukraine war.

Bank of England Governor Andrew Bailey said household disposable income is expected to fall by 1.75% this year.

He added: “I recognize the difficulty this will cause for many people in the UK, especially those on the lowest incomes.”

He also warned that rate hikes continued saying that “some degree of further tightening of monetary policy is likely to remain appropriate in the coming months.”

The Bank of England’s move will trigger an immediate increase in housing costs for around one in four homeownership households with the right tracker, discount or variable-rate mortgages. in line with the Bank of England’s prime rate.

For a homeowner with a typical 25-year London mortgage of £250,000, it would raise the monthly bill by around £35 from £1,353 to £1,388. For borrowers with a larger £500,000 mortgage, the monthly repayment will increase by around £70 from £2,706 to £2,776.

For the majority of people with fixed-rate mortgages, the decision – which is expected by City forecasters – will make no immediate difference.

However, when their current trades come to an end, they will have to improve at a much higher rate than they have fixed on their current trades, especially if they are using a follower tool. two-year follow-up.

Fixed rates hit all-time lows last summer and autumn when the Bank of England’s prime rate stood at just 0.1%. It started to increase in December when it increased to 0.25%. There have been additional quarterly rallies at the Febraury and March MPC meetings.

At their lowest point, their fixed mortgage rate was also below one percent.

On Wednesday, Best price available for borrowers with a 25% deposit seeking repairs in two years, which is 2.29% over First Direct. Borrowers with only a 10% deposit can close at 2.49% with the same lender.

Borrowers looking for five-year peace of mind can fix it at 2.3% with Barclays if they have a 25% deposit, or 2.64% with First Direct if they only have 10% upfront.

Paul Johnson, director of the Institute for Fiscal Studies, warned earlier about the impact on people’s mortgages following a series of rate hikes by the Bank of England.

He told BBC Radio 4’s Today programme: “That could double your mortgage interest payment for a period of time, so even small changes today, little especially down as people run through some fixed rate, which can have a really big impact on people who already have substantial mortgages. “

‘Homeowners on the verge of not being able to ignore’

Liberal Democrat MP Sarah Olney said Londoners will be “unjustly beaten” by the latest price hike as the “out of control housing market” in the capital forces homeowners to spend mortgages are much larger than elsewhere in the UK.

A poll commissioned by the Liberal Democrats found that 54 per cent of homeowners said the Government was not doing enough for them to cover mortgage costs.

The Liberal Democrats are calling for a new Emergency Mortgage Fund to assist homeowners on the brink.

“It was the families who had to plan and save to get on the housing ladder that worries me most,” said Ms Olney, a Richmond Park MP and Liberal Democrat Business spokeswoman. when the exchange rate increases. They need help now but all they get from this Government are constant tax increases and empty promises.

“I am calling on the Prime Minister to cut taxes and introduce a safety net for families unable to pay their mortgage. Homeowners on the brink can no longer turn a blind eye to this Government.”

Cory Askew, Chestertons dealer sales, said: “While interest rates have previously increased this year, the number of buyers signing up has only increased, most recently up 39% in April compared to April. April 2021. With one more hike, and the Bank of England with a Target Base Rate of 1.5% by the middle of next year, the rate hike is solely aimed at increasing buyer motivation. to secure their purchase quickly. ”

David Johnson, chief executive of independent property consultancy INHOUS, said: ‘In the mainstream housing market, there is no doubt that the latest rate hike will affect homeowners. home. Many people we spoke to felt that recession was inevitable.

“In London, the rate hike will affect buyers who bought within the last five or six years and paid a premium to do so. Between the £2 million and £8 million price bracket, the market is very competitive, with the majority of buyers needing financing and paying a strong price to secure their home.

“We could see these homeowners hit hard at a later stage if there are some more rate hikes, but this is not going to happen anytime soon. It also depends on the financial resources they have taken out; if they choose a medium or long term fixed rate mortgage they may be fine but if they choose a variable rate it can be a period of anxiety for them. ”

LEAVE A REPLY

Please enter your comment!
Please enter your name here